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Transcript of Your Full-Service Trust Experts · • Revocable living trusts • Trusts under wills We can also...

  • Your Full-Service Trust Experts

  • Cornerstone is a boutique trust company that works with families and individuals to help implement their estate planning goals and transition wealth from one generation to the next. We’re specialized, responsive and provide highly personalized service designed to meet the individual needs of each of our clients.

    Our goal is to ensure that our clients’ wealth is protected and their values and intentions are honored long after they’ve passed on. To be successful, we take the time to understand our clients’ values and objectives as we help them implement their estate planning goals.

    OUR CLIENTSOur clients spend a lifetime building successful businesses or accumulating wealth and want their families to benefit from their years of hard work. These clients want to preserve their wealth in a way that is consistent with their values and provides measurable benefits to their family. Our clients appreciate the advantages that come from an independent and neutral, third-party trustee.

    OUR APPROACHWe approach our work with the understanding that every client is unique. The amount of money they have, the amount they intend to part with, their values and aspirations for their family members, all combine to make each trust situation distinct. We begin the process, by asking questions about the client, their life’s work, their philosophy towards wealth and their estate planning goals.

    OUR SERVICECornerstone is positioned to provide unique offerings and services. Being established as a trust company in South Dakota provides additional advantages, including unlimited trust duration, modern trust laws, and tax benefits. As an independent public trust company, we provide many services other trust companies will not. We serve domestic and international clients, clients with traditional assets and those with non-marketable/private securities.

    Cornerstone can build your estate plan from the ground up including investment management services. We work with our clients to create a custom portfolio that meets the needs, goals and objectives of current and contingent trust beneficiaries.

    Welcome!

  • About Cornerstone

    Domestic Asset Protection Trusts (DAPT)

    Dynasty Trusts

    Decanting

    Revocable Living Trusts

    Irrevocable Living Trusts

    Estate Process

    Asset Management Process

    Fee Schedule

    Table of Contents

  • About Cornerstone

    WHO WE ARE Cornerstone Private Asset Trust Company, LLC, a boutique trust company, helps clients implement their estate planning goals and transition wealth from one generation to the next. We provide services above and beyond those of a traditional trust company by focusing on the uniqueness of each client, and their long-term goals.

    A PREMIER TRUST JURISDICTIONBeing established as a trust company in South Dakota provides additional advantages, including:• No state income tax on income, capital gains, dividends,

    interest, intangibles or other income• Unlimited trust duration• Self-settled asset protection trusts• Some of the best privacy statutes for trusts in the United

    States• Modern trust laws that allow for directed and delegated trusts• Flexibility and control over, or input on, investment and

    distribution decisions• An efficient and cost-effective process for trust modification,

    reform, decanting, and virtual representation

    TRUST SERVICESAs an independent public trust company, we provide many services other trust companies will not. We can serve as trustee for any type of trust, including:• Dynasty trusts• Asset protection trusts• Charitable trusts• Life insurance trusts (ILIT) • Irrevocable trust• Revocable living trusts• Trusts under wills

    We can also serve as the agent for individual trustees, as conservators to perform administrative duties for those unable to manage their own affairs, or as personal representatives and executors of estates.

    INVESTMENT MANAGEMENT• We work with the client to create a custom portfolio

    that meets the needs, goals and objectives of current and contingent trust beneficiaries.

    TRUSTEE ADMINISTRATION The role of the corporate trustee is to oversee and administer the assets of the trust as directed in the governing trust-document. In this role, we perform a broad range of functions, including: • Maintain detailed records on all trust activity • Provide regular reporting to the trust interested parties• Review the trust assets to ensure they are invested properly• Annual review of trust administration and investment

    activities• Provide tax reporting and ensure tax returns are filed each year• Provide comprehensive education for beneficiaries on the

    financial resources set aside in trust for their benefit

  • Domestic Asset Protection Trusts

    Purpose: A domestic asset protection trust (“DAPT” for short), also referred to as a self-settled asset protection trust, is a specific type of trust that may be established by a settlor under state law in a limited number of states, including South Dakota. A South Dakota

    DAPT provides significant wealth preservation and transfer benefits by allowing the settlor to protect the trust assets against certain types of creditor claims.

    KEY POINTS• No requirement that the settlor of a South Dakota DAPT be

    a resident of South Dakota.• To qualify as a South Dakota DAPT, the trust must

    1) expressly incorporate South Dakota law; 2) be irrevocable; 3) contain a spendthrift clause; and 4) have at least one qualified trustee in South Dakota.

    • No limit on the amount of funds or property that can be transferred to a South Dakota DAPT.

    • South Dakota law permits settlors of South Dakota DAPTs to retain certain qualified interests and powers, including the following: 1) veto power over distributions; 2) income distributions from trust property; 3) annual payments of up to 5 percent of the initial value of the trust or of its value as determined from time to time; 4) principal distributions made in the sole discretion of a trust advisor or other qualified person or pursuant to an ascertainable standard; 5) non-general power of appointment rights (lifetime or testamentary); 6) right to use real property held under a qualified personal residence trust; 7) right to serve as a investment trust advisor; and 8) right to replace a trustee, trust protector or investment trust advisor.

    • While a South Dakota DAPT protects trust assets against most creditor claims, trust assets may not qualify for protection against the following types of claims: 1) certain claims for child support, alimony and divorce decrees of property division; and 2) certain “fraudulent transfer” claims if a creditor can prove by “clear and convincing” evidence that a transfer of property to a DAPT was intended to defraud the creditor. In addition to the high “clearing and convincing” burden of proof required under South Dakota law, fraudulent transfer claims in South Dakota are subject to a short statute of limitations period. Creditors must bring these claims within two years of the date of the alleged fraudulent transfer (or, if later, 6 months from the date of discovery in the case of pre-existing creditor claims). However, like other states, if the settlor files bankruptcy, federal bankruptcy law provides for a ten-year “look back” period for fraudulent transfer claims.

    SPECIFIC SITUATIONS WHERE THIS ADDITIONAL BENEFITS OF ESTABLISHING A DAPT IN SOUTH DAKOTA• DAPT could be established as a dynasty trust to continue for

    an infinite duration for the benefit of future generations.• South Dakota does not impose state tax on income, capital

    gains, dividends, interest, or intangibles. • South Dakota provides for some of the most efficient

    and cost-effective processes for court supervision, trust modification, reformation, decanting, privacy and virtual representation.

    • When coupled with a South Dakota DAPT, South Dakota’s advantageous limited partnership and LLC statutes provide additional opportunities for maximum creditor protection.

    TYPES OF INDIVIDUALS WHO MAY BENEFIT FROM ESTABLISHING A SOUTH DAKOTA DAPT• Individuals with high net worth.• Individuals in high risk professions that carry increased

    liability exposure (e.g. medical professionals, lawyers, business owners).

    • Individuals who have non-exempt or unprotected assets susceptible to lawsuit exposure.

    SOUTH DAKOTA LAW• The laws authorizing the establishment of a South Dakota

    DAPT are contained in Chapter 55-16 of the South Dakota Codified Laws, entitled “Qualified Dispositions in Trust”.

  • South Dakota Dynasty Trusts

    Purpose: A dynasty trust is a vehicle used to allow a settlor to pass his or her wealth from generation to generation by insulating the trust assets from transfer taxes like estate, gift and

    generation skipping transfer (“GST”) tax, creditor claims, and beneficiaries who are unable to responsibly manage their finances (e.g. minor, disabled or spendthrift beneficiaries).

    KEY POINTS• No requirement that the settlor of a South Dakota dynasty

    trust be a resident of South Dakota.• To avoid inclusion in the Settlor’s estate for tax purposes, a

    dynasty trust must be irrevocable.• To qualify as a South Dakota dynasty trust, the trust must be

    “sitused” in South Dakota (meaning under the jurisdiction of South Dakota law). To establish situs in South Dakota, at least one of the trustees or beneficiaries of the trust must be a South Dakota resident and/or some or all of the trust assets must be held in South Dakota.

    SOUTH DAKOTA HAS BEEN CONSISTENTLY RANKED ONE OF THE BEST JURISDICTIONS FOR DYNASTY TRUSTS. HERE’S WHY:• Dynasty trusts in South Dakota may be of unlimited

    duration. Although all states allow for dynasty trusts, the large majority of states limit the duration of these trusts to a finite number of years under a law known as the “rule against perpetuities.” South Dakota is one of only 19 states that has repealed its rule against perpetuities, meaning a settlor may establish a dynasty trust in South Dakota to continue in perpetuity for the benefit of future generations.

    • South Dakota has no state income tax. South Dakota is one of only a handful of states that does not impose state tax on trust income, capital gains, dividends, interest, or intangibles.

    • Trust laws in South Dakota allow for efficiency and flexibility in times of change. South Dakota provides for some of the most efficient and cost-effective processes for court supervision, trust modification, reformation, decanting, and virtual representation.

    • South Dakota law also permits the appointment of trust investment advisors and trust protectors to help ensure that the settlor’s wishes will be carried out in perpetuity.

    • Privacy is protected under South Dakota law. South Dakota does not require trust instruments to be filed or recorded in public records. South Dakota law also allows court records to be sealed with respect to any court proceedings concerning the administration of a trust. This is particularly important for high-profile families, families with significant wealth or in the case of disputes between interested parties.

    • South Dakota statutes afford superior asset protection benefits. Discretionary interests, limited powers of appointment, or remainder interests in a third party trust are not considered property interests subject to creditor claims under South Dakota law. South Dakota’s self-settled trust statutes and advantageous limited partnership and LLC statutes also provide additional opportunities for maximum creditor protection in connection with dynasty trusts.

    SOUTH DAKOTA LAW• In 1983, South Dakota repealed the rule against perpetuities

    with respect to trusts established in the state.

  • Trust Decanting

    Purpose: To move assets from one trust to another.

    KEY POINTS SPECIFIC TO SOUTH DAKOTA:• South Dakota does not require trustees to have absolute

    discretion to enact this statute.• The trustee is limited by the power they have; they can only

    move or reallocate based on the Trustee’s power to make distributions.

    • South Dakota statute also differs because of the ability to reduce an income interest unless it falls into one of the following categories: CRT/GRAT/Exception for Marital Deduction. This brings to question whether or not certain trust types are viable if the income interest is reduced or eliminated. Also, as a result tax implications of changes need to be recognized when considering decanting.

    • This statute also provides for corpus or principal invasion for a future beneficiary who may have had only access to income distributions. Therefore, beneficiaries that normally would have only received discretionary distributions from one specific category may have access to both categories under this statute.

    • No notice to, or consent of beneficiaries or the court is required.

    • When the document is exercised by the trustee it must be filed with trust document.

    • The power can not be applied to assets that the beneficiary has a current right to withdraw. In addition, vesting periods on assets cannot be extended by this power.

    LIMITATIONS:• Trusts must have commonality of at least one current or

    future beneficiary that distributions can be the object of to exercise of this power.

    • Trustees can only exercise this power if they are not themselves a beneficiary and if the beneficiaries have no right to change trustees on the original trust unless the power is only to be exercised in reference to health, education, maintenance or support distributions. This eliminates the potential for the trustee to increase payments to self or to a beneficiary who can change the trustee on the original trust. Same trustee not required on both trusts.

    SPECIFIC SITUATIONS WHERE THIS WOULD BE OF BENEFICIAL:• Change of beneficiary circumstances (eg. Power to distribute

    to “second trust” instead of directly to a beneficiary should circumstances warrant.)

    • Change in administrative provisions and/or lowering administrative costs

    • Change of trustee• Extending termination date of trusts (with South Dakota law

    this is typically a non issue)• Correct trust drafting errors• Converting from grantor to non-grantor trusts or vice versa• Change of governing law and trust situs (opportunity to

    avoid state or local tax)• Dividing property held in trust

    SOUTH DAKOTA LAWThe laws containing decanting are contained in Chapter 55-2-15 of the South Dakota Codified Laws beginning with, “Trustee authorized to distribute income or principal from first trust may appoint all or part in favor of trustee of second trust.” This law was passed in March 2007.

  • Revocable Living Trusts

    A revocable living trust is an effective estate planning tool and frequently-used supplement to a will. The following are questions many of our customers have about trusts:

    WHAT IS A REVOCABLE LIVING TRUST? A revocable living trust is a legal document designed to protect both you and your assets. A trust allows you to direct a trustee to manage and distribute your assets the way you decide is right for you and your family. With a properly funded trust, your estate does not have to go through probate and your finances will not become a matter of public record.

    HOW DOES A TRUST DIFFER FROM A WILL? A will is a legal document containing instructions on how to distribute your assets at your death. A will must go through probate and does not give anyone else authority to act on your behalf or manage your assets during your lifetime, even if you become incapacitated.

    WHAT IS PROBATE? Probate is a legal process requiring court administration of a person’s assets, ensuring that their debts are paid and assets distributed according to the terms of his or her will.

    DOESN’T JOINT OWNERSHIP AVOID PROBATE? It usually just postpones probate. When one owner of a jointly-owned asset dies, full ownership normally does transfer to the surviving joint owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must go through probate before it can be distributed. Other problems of joint ownership include loss of control and an increased chance of losing the asset to a creditor of a joint owner.

    HOW DOES A TRUST AVOID PROBATE? When you set up a revocable living trust, assets may be transferred from your name to the name of your trust. This activity is known as “funding” your trust. It is not necessary for trust assets to go through the probate process in court.

    DOES HAVING A TRUST RESULT IN LOWER ESTATE TAXES?A trust can be an important part of an integrated plan for estate tax savings, depending on the individual’s situation.

    IS A LIVING TRUST EXPENSIVE? Not when compared to all the costs of court procedures if necessary at your incapacity and/or death. The cost of trust preparation will depend on your circumstances and the nature of your estate plan. It’s a good idea to get an estimate from the attorney of the total cost before he or she begins drafting the trust.

    WHAT ARE SOME ADVANTAGES OF A REVOCABLE LIVING TRUST? Time: Court approval is not required for payment or distribution. Expense: No filing fees or legislatively set fee schedule for estate administration. Privacy: A trust is not filed with the court as a matter of public record. Control: Your assets can continue to be held in trust for minor descendants or charity as long as you direct, rather than being immediately distributed at the conclusion of the probate process. You can be the trustee of your own trust during your lifetime. The trust will be managed by a successor trustee upon your incapacity or death. Revocability: You can change your trust provisions whenever you want.

    DO I STILL NEED A WILL IF I HAVE A REVOCABLE LIVING TRUST? Yes, a will is still necessary for a couple of reasons. First, a will is required to name the guardian of any minor children. Second, you will need a will to act as a safety net if you forget to transfer an asset into your trust. This document is called a “pour-over” will and it covers any assets that were not owned in your trust, providing for their transfer into the trust as part of the probate process.

    WHAT HAPPENS TO MY TRUST WHEN I DIE OR BECOME INCAPACITATED? Your designated successor trustee steps in and manages the trust assets for you, using your assets to pay expenses as necessary. If you recover from incapacity, then you resume control. Upon your death, your successor trustee distributes your assets in accord with your direction.

    WHO CAN SERVE AS A TRUSTEE OR A SUCCESSOR TRUSTEE?You can serve as your own trustee or name another individual to do so. Many people decide to name a corporate trustee such as Cornerstone as trustee or successor trustee, especially if they do not have the time, ability, or inclination to manage their assets. At Cornerstone we specialize in trust administration and wealth management.

  • Irrevocable Trusts

    An irrevocable trust is an effective estate-planning tool used to minimize tax burden or protect assets from creditors. The following are questions many of our customers

    have about irrevocable trusts:

    HOW DOES AN IRREVOCABLE TRUST DIFFER FROM A REVOCABLE TRUST?An irrevocable trust is designed to prevent alteration and dissolution once it has been created – the beneficiaries, assets, and terms are inflexible and completely final. Once you relinquish control, the assets and property (including any appreciation) is no longer part of your taxable estate. However, South Dakota trust laws allow irrevocable trusts to be reformed or decanted to accommodate the trustee or beneficiaries. An irrevocable trust may need modification to improve the trust’s administrative provisions, replacing a trustee or moving the trust jurisdiction. Decanting is utilized when the trustee has discretionary authority and wishes to “pour” funds from one trust to another with more favorable terms.

    WHAT ARE SOME OF THE ADVANTAGES OF AN IRREVOCABLE TRUST?Your estate’s ultimate tax liability may be reduced, resulting in more of your assets passing to your beneficiaries. Additionally, the assets in an irrevocable trust are not subject to probate and may also be protected from creditors.

    WHO CAN SERVE AS A TRUSTEE OR SUCCESSOR TRUSTEE?A close friend or relative can serve as a trustee. Many people decide to name a corporate trustee such as Cornerstone as trustee or successor trustee, especially if they do not have the time, ability, or inclination to manage their assets. At Cornerstone we specialize in trust administration and wealth management.

    ARE THERE DIFFERENT TYPES OF IRREVOCABLE TRUSTS? HOW DO THEY WORK?Dynasty Trusts: A dynasty trust is an irrevocable trust that is designed to last as long as legally feasible. The purpose of the trust is to pass the assets in the trust through as many generations as possible without imposing any transfer taxes (gift, estate, or generation-skipping taxes) on the property in the trust.Charitable Remainder Trusts: These trusts provide you or your family with a lifetime of income, while principal assets are donated to charity at the death of the income beneficiary.Life Insurance Trusts: An irrevocable life insurance trust (ILIT) is a trust primarily set up to hold one or more life insurance policies. The main purpose of an ILIT is to avoid federal estate tax. If the trust is drafted and funded properly, your loved ones should receive all of your life insurance proceeds, undiminished by estate tax.Asset Protection Trusts: Because you relinquish control over the assets you place in the trust, they’re generally beyond the reach of your creditors. In addition, by adding special language to your trust through a spendthrift clause, you can further protect trust assets from your beneficiaries’ creditors.Self-Settled Trusts: A self-settled trust is a trust in which the person who creates the trust can name himself or herself as the primary, or even sole, beneficiary. These trusts give the trustee wide latitude to pay as much or as little of the trust assets to any or all of the eligible beneficiaries as the trustee deems appropriate. Creditors can only reach property that the beneficiary has the legal right to receive. Therefore, the trust property will not be considered the beneficiary’s property, and any creditors of the beneficiary will be unable to reach it.GST-Exempt Trusts: Generation-skipping trusts exist when the beneficiaries are more than one generation away from the grantor (i.e. grandchildren or great-grandchildren). These trusts are designed to minimize the effect of the heavy generation-skipping tax that is applied at the federal level.

  • When you decide to enlist Cornerstone for your estate planning needs, we will work through the following steps to ensure a seamless experience.

    PREPARE

    DRAFT

    REVIEW

    IMPLEMENT

    MONITOR

    Meet with client to learn about their personal situation, goals and objectives, and concerns. Discuss implementation strategy and ideas.

    Attorneys draft documents as Cornerstone prepares asset strategy and administration approach.

    Connect with clients to review documents, discuss expectations, and finalize plan.

    Transfer assets to fund account and execute asset management strategy.

    Monitor accounts and legal landscape for continuous review. Calibrate as needed.

    Estate Process

  • When you decide to enlist Cornerstone for your asset management needs, we will work through the following steps to ensure a seamless transition.

    IDENTIFY GOALS

    TRANSFER

    IMPLEMENT

    REVIEW

    Create investment strategy based on personalized goals and objectives.

    Complete engagement and transfer paperwork for asset management and facilitate in the transfer of assets.

    Place trades of specific funds to implement.

    Review and balance to manage risk and return goals. Confirm goals and objectives remain unchanged or recalibrate the strategy for new goals.

    Asset Management Process

  • 1.866.200.6528WWW.CORNERSTONETRUST.NET

    WelcomeTable of ContentsAbout CornerstoneDomestic Asset Protection TrustDynasty TrustDecantingRevocable TrustIrrevocable TrustEstate ProcessAsset Management ProcessFee Schedule for Full Service Trustee